The final image of this production by Israeli company Habima is a stark one. Small and crushed, as if weighed down by history itself, Jacob Cohen's broken Shylock – a man who has lost daughter, fortune and home – is seen, suitcase in hand, walking away from Venice, an eternal wandering Jew. But it was impossible not to think of other displaced people, too, most particularly the Palestinians.

This was inevitable, perhaps, during an evening that held as much drama off stage as it did on: the production took place amid airport-style security and pro-Palestinian protests were held both outside the theatre and during the performance. For much of the first half, a woman stood up in one of the galleries silently in protest, her mouth taped shut. Others were removed.

Habima's visit, part of the World Shakespeare festival, has been mired in controversy, with many leading theatre artists – including the Globe's former artistic director, Mark Rylance – saying that Habima's invitation should have been withdrawn because the company has performed in illegal Israeli settlements in the occupied Palestinian territories. Others, including playwright Howard Brenton, have argued that such an action would amount to censorship.

Before last night's performance, Rylance's successor, Dominic Dromgoole, asked for the audience to respect the performers. "You're not watching politicians or policy-makers," he said. "You are watching artists who are here to tell a story." Habima told the story fluently, if not spectacularly, in a revival that offers both a visual nod to the Elizabethan era and the sinister, beaky masks of the Venetian carnival.

Beneath the playful atmosphere and the comedy of the casket scenes runs something darker. Shylock is set upon by a braying, drunken bunch of privileged louts, and the corset ties that bind Hila Feldman's initially doll-like Portia (the rich heiress who dons a lawyer's disguise to outwit the money lender) reappear in other forms, too: most notably the torturous ropes that cut into the flesh of first Antonio, then Shylock. Similarly, the reams of paper on which the bonds of marriage are signed become curling parchment obstacles that trip everyone up, not just Shylock. You wonder about the future happiness of all the marriages.

When Liraz Chamami's Jessica drops the stolen money chest from her father's window into the hands of Nir Zelichowski's Lorenzo and his friends, it's played for comic effect, but it underlines the fact that this is a play in which it is money, not love, that makes the world go round. As Portia proves with cold, cruel clarity in the courtroom, there's more than one way to extract a pound of flesh.